Israeli PM Ehud Olmert is to meet top ministers later on Tuesday to discuss whether to launch a military offensive against the Gaza Strip, reported BBC.
The meeting comes a day after the parents of an Israeli soldier held by Palestinian militants in Gaza received a letter from their son, Gilad Shalit.
Ceasefire negotiations between Israel and Hamas, which controls Gaza, are currently being mediated by Egypt.
Israel wants Cpl Shalit to be freed as part of any truce.
Hamas says it wants a truce, but that his release can only be part of a separate deal involving an exchange of prisoners.
Mr Olmert will hold talks with Foreign Minister Tzipi Livni and Defence Minister Ehud Barak before convening the security cabinet on Wednesday.
"The current situation cannot last. The prime minister will discuss the various options available, including the use of force," a government spokesman told the AFP news agency.
"It is possible a decision will be taken after this meeting of the security cabinet."
Militants in Gaza fire rockets at southern Israel on an almost daily basis, a response they say to Israeli military operations in Palestinian territory.
Israel has sealed off the territory and blocks all but essential humanitarian supplies, while launching regular raids in an attempt to counter militant fire.
Militant rocket fire killed two people in Israel during May. The latest death brings to 16 the toll from such attacks since 2000.
About 500 people, nearly all of them Palestinians and more than half of them militants, have been killed in violence since the troubled Israeli-Palestinian peace process was revived in November 2007.